Thursday, February 25, 2016

Safran continues to drive up profitability – Les Echos

In his first annual report as head of Safran, Philippe Petitcolin has not had her complain. Despite the “misfires” technical Silvercrest engine, which results in a charge of 654 million euros, the aerospace group, defense and security still managed to improve its operating margin, increased to 14% in 2015. operating profit rose 16.4% last year to 2.43 billion euros, sales organic growth of 13.4% to 17.4 billion euros. Available cash has also peaked at 974 million, up 31.6% year on year. And improving profitability is expected to continue in 2016, with an expected increase in operating result “about 5%” for a turnover up “of 2% to 4%. “ what give Safran medal french champion profits in the aerospace and defense sector.

aircraft engines propel the results

the main factor takeoff profits remains the CFM56 engine, produced in cooperation with GE team and all Boeing 737 and half Airbus A320. Despite the huge success of its successor, the Leap engine, already ordered more than 10,000 copies, CFM has still sold 1,636 copies in 2015 (against 1,395 controls Leap) and remains the primary source of income of the group. Especially as order intake is added the growing number of cases of maintenance of these engines, up 18.9%. In total, the turnover propulsion branch, which includes the military engines, helicopters and rockets rose 14.3% to 9.31 billion euros, against 11.2% for aircraft equipment (4.94 billion) and 3.7% ($ 1.2 billion) for military equipment. But the main diversification of industry, safety equipment, also continues to grow, with sales up 22.7% to 1.87 billion.

the paradoxical effect of the dollar

Safran has also benefited from the rise in the dollar against the euro, even if it paradoxically results in a net income loss of 424 million, according to IFRS accounting standards. The rise of the greenback, while inflating the revenue of 1.4 billion euros, indeed obliged Safran to sign in its accounts a depreciation of its currency hedging of 3.24 billion euros, D hence the net loss on the last line of the consolidated account income, while adjusted income statement shows a net result, more real, to 1.48 billion euros.

the ramp-up of Leap

This alignment of the planets is expected to continue in 2016, although the growth forecast of 2% to 4% takes no account of the exchange rate. “This may seem low, but it is higher than the forecast of Airbus and Boeing expect a rather slight depression in 2016″ , argues Philippe Petitcolin. The main challenge for Safran, as for Airbus and Boeing, will be rather keep commitments, managing the ramp-up of production of the Leap engine without destabilizing the production of CFM. “This is not a cakewalk, the boss recognizes Safran but we are perfectly in line with our goals for entry into Leap-a service [of the A320 neo Editor's note] mid-2016 and the Leap-B [that of the Boeing 737 Max Editor's note] to 2017, as planned in 2011 “.

Silvercrest pushed back to the 2018

However, the Silvercrest engine, which was to be delivered to Dassault this year for its new business jet Falcon 5X, will not be ready before 2018, confirmed Philippe Petitcolin. This is the time required to Safran’s engineers to correct design defects found on the prototype. “ The engine was not at expected performance and life” , he acknowledged. But again, the Safran boss wanted to be reassuring. “ We spent the first phase of solving technical problems, he assured. We are now in phase 2 audit of the solutions, which should last until spring. Then we move to Phase 3 manufacturing and validation of new parts until engine certification in 2018 “.

optimistic for Airbus Launchers Safran

Safran boss was also optimistic about another problem folder: d-Airbus constitution Safran Launchers, the joint venture which will bring together the space activities of Airbus and Safran and will notably support the future European Ariane 6. at their results conference, Wednesday, Airbus executives did not hide their “frustration” and their concern at delay in this process, which apparently runs into a tax problem, even to doubt its success, if the case did not result in April. “I too am frustrated by the delays, but I’m not in the same key , has said Philippe Petitcolin. I am convinced that we will find solutions and I do not impose myself deadline of the end of March. And I do not considering a plan B “. But it is true that it is not Airbus Safran, the tax authorities demanded the payment of tax on the cash payment of 800 million euros, to be paid by Safran to Airbus in the wedding presents of their space activities.